TSX ends best week in more than a decade as U.S. announces trillions in aid

TORONTO --
Canada's main stock index ended its best week in more than a decade as a massive intervention by the U.S. Federal Reserve offset weak employment numbers on both sides of the border.

The S&P/TSX composite index closed up 240.92 points at 14,166.63. That's the highest closing in nearly a month and a 9.5 per cent gain in the shortened trading week. Markets are closed for Good Friday.

In New York, the Dow Jones industrial average was up 285.80 points at 23,719,37. The S&P 500 index was up 39.84 points at 2,789.82, while the Nasdaq composite was up 62.67 points at 8,153.58.

The Dow and S&P 500 had their best week since 1974 by climbing 12.7 per cent and 12.1 per cent respectively. Nasdaq gained 10.6 per cent.

North American stock markets rallied early after the U.S. central bank said it would provide up to US$2.3 trillion in loans to households, local governments and businesses, as well as buy high-yield bonds directly and commercial mortgage-backed securities.

The announcement overshadowed a report that more people than expected applied for unemployment benefits last week.

"I think it was intended to soften the blow to the fact that we've had now two weeks in a row of more than six million claims," said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

In Canada, the economy lost 1,011,000 jobs in March -- the worst recorded single-month change -- as the COVID-19 crisis began to take hold, lifting the unemployment rate to 7.8 per cent.

The Canadian dollar traded for 71.51 cents US compared with an average of 71.26 cents US on Wednesday.

Eight of the 11 major sectors on the TSX closed higher, led by materials, consumer discretionary and health care.

Materials rose 6.9 per cent as shares of Seabridge Gold Inc., Silvercorp Metals Inc. and B2Gold Corp. each surged by at least 12.5 per cent on higher gold prices.

The June gold contract was up US$68.50 or four per cent in a day to US$1,752.80 an ounce. That's the highest level since late 2012. The May copper contract was essentially flat at US$2.26 a pound.

Investors have turned to gold as a hedge against inflation that may stem from massive stimulus from the Fed and the U.S. government, which is going to run trillions of dollars in deficits.

Consumer discretionary was pushed up nearly four per cent by a 26 per cent recovery by MTY Food Group Inc., 12.1 per cent by Spin Master Corp. and 11.7 per cent by BRP Inc.

A nearly 15 per cent gain by Bausch Health Companies Inc. offset a 4.7 per cent loss by cannabis producer Cronos Group Inc. to help the health care sector.

Consumer staples lost the most on the day with Empire Company Ltd. down 6.2 per cent.

Lower crude oil prices pushed down the energy sector as shares of MEG Energy Corp. lost 9.2 per cent and Baytex Energy Corp. was seven per cent lower.

The May crude contract was down US$2.33 at US$22.76 per barrel and the May natural gas contract was down five cents at US$1.73 per mmBTU.

Despite an early rally, crude oil prices fell over uncertainty about a production cut by OPEC and Russia.

"It's taken a little bit of the wind out of sails of the broader equity markets and so it's resulted in a bit of a selloff here this afternoon," Archibald said.

An agreement reached by the cartel will see it cut supply by 10 million barrels per day for May and June, eight million barrels from July to December and by six million barrels until next April.

Part of this deal hinges on North American countries cutting their own output with G20 energy ministers meeting Friday.

Prices could rise on Monday if there is a large agreement from a number of G20 countries to limit supply in the face of 25 million to 35 million barrels of lost daily demand because of the economic shutdown to stop the spread of the novel coronavirus.

"Sure, you can absolutely see energy prices move back into the US$30 level. But that's going to require confidence from the marketplace that there is a long-term arrangement, something longer than just three months to reduce supply."

North American stock markets have recovered more than half the losses since hitting record highs in February. The TSX is up 26 per cent from its March 23 low and is 21 per cent off its peak levels.

Markets should eventually set new record highs but they tend not to move in straight lines, said Archibald.

While markets may have hit their bottoms, it's still possible they will fall again from current levels. Much will depend on how quickly the economy reopens and people get back to work in the face of COVID-19.

"It would be unlikely that we would go back and test the low. But the longer that the cases continue to stay elevated and the longer the potential for the economy to be shut, then in my mind, the greater the likelihood is that we would maybe come back somewhere around that 2,200 level (on the S&P 500) or even potentially lower."